Crescent Point Energy Stock Slips Despite Rosier Outlook

With production increases in 2017 and beyond and continued recovery in oil prices, Crescent Point Energy Corp. (TSE:CPG) shares could appreciate significantly in the medium term

SmallCapPower | October 30, 2017: Crescent Point Energy Corp. (TSX:CPG) (NYSE:CPG) shares fell more than 3% Thursday after the Company reported that its third-quarter 2017 net loss more than doubled to $271 million, or $0.50 per share, weaker than the consensus estimate of ~$0.04 loss per share. The loss widened as a result of non-recurring items such as impairment expense and unrealized derivative losses. Adjusted net earnings from operations which exclude these one-time items came in at $33.7 million, or $0.06 per share, compared to a loss of $22.0 million, or $0.04 per share, in the year-ago quarter.

Net revenues for third quarter increased 19% to $766.9 million, driven primarily by an 18% jump in crude oil sales as a result of a 11% increase in crude oil production to 139,254 bbls/d along with a 6% rise in realized prices. Overall production increased 15,000 bbl/d to 176,069 as a result of strong growth in the Company’s core resource plays. Crescent Point Energy also announced strong results from horizontal drills in the Uinta basin during the quarter. While the production increase is attributable to the Company’s successful capital development program, the increase in realized prices was a result of a 3% increase in the Cdn$ WTI benchmark price. Despite higher average selling prices, operating netbacks decreased 2% to 28.62 per boe during the quarter as a result of a 6% increase in operating expenses and lower realized gain on derivatives.

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Cash flow from operating activities surged 33% to $437 million, while adjusted funds flow from operations rose 6% to $389 million. Crescent Point Energy declared a dividend of $49.4 million, $0.09 per share, for the third quarter.

During the quarter, Crescent Point Energy announced agreements to dispose of ~3,000 boe/d of noncore assets for ~$190 million, bringing total dispositions in 2017 to $280 million. Based on strong production growth during the quarter, Crescent Point Energy revised its 2017 average production guidance to 175,500 boe/d from 174,500 boe/d earlier, while retaining the exit guidance of 183,000 boe/d. Capex guidance was also revised upwards to $1.55 billion from $1.45 billion earlier. Strong operating cash flows, dispositions, and unutilized credit capacity of $1.5 billion will be utilized to fund the huge capex plans.

Crescent Point Energy is a conventional oil and gas producer with high-quality light and medium oil and natural gas assets across western Canada and the U.S. As with other Canadian oil plays, the Company’s shares have been under pressure over the past year, down nearly 50%. With production increases in 2017 and beyond and continued recovery in oil prices, Crescent Point Energy shares could appreciate significantly in the medium term. The Company has a current market cap of $4.91 billion and trades at a price-to-TTM sales multiple of 1.9x.

Disclosure: Neither the author nor any of the principals at SmallCapPower, or their family members, own shares in the company mentioned above.

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